The Implied Futures Financing Rate
57 Pages Posted: 1 Dec 2016 Last revised: 20 Apr 2017
Date Written: November 29, 2016
We explore the cost of implicit leverage associated with an S&P 500 Index futures contract and derive an implied financing rate. While this implicit financing rate has often been attractive relative to market rates on explicit financing, the relationship between the implicit and explicit financing rates has been volatile and varied considerably based on legal and economic regimes.
Keywords: futures, financing, leverage, futures implied rate, S&P 500 Index, Commodity Futures Modernization Act, CFMA, financial crisis, bootstrap confidence interval, mean reversion
JEL Classification: G01, G32, G12, G18, G23, G13
Suggested Citation: Suggested Citation